Schroder BSC Social Impact Trust (LON:SBSI) Has Announced That It Will Be Increasing Its Dividend To £0.023

Schroder BSC Social Impact Trust plc's (LON:SBSI) periodic dividend will be increasing on the 20th of December to £0.023, with investors receiving 77% more than last year's £0.013. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Schroder BSC Social Impact Trust

Schroder BSC Social Impact Trust Is Paying Out More Than It Is Earning

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 75% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

EPS is set to fall by 37.9% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 889%, which could put the dividend in jeopardy if the company's earnings don't improve.

Schroder BSC Social Impact Trust Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of £0.0105 in 2021 to the most recent total annual payment of £0.013. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Schroder BSC Social Impact Trust's EPS has declined at around 38% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Schroder BSC Social Impact Trust's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Schroder BSC Social Impact Trust has 4 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.